Applying for a personal loan is a process that you want to prepare for adequately. Aside from having all the required documents, it’ll be helpful to have a comprehensive knowledge of your finances.
Lenders could have questions for you during the application process, and having answers ready can help you look more confident and give you a better shot at a successful application.
Here’s how you can prepare for a personal loan application:
Prepare to Explain Why You’re Applying for a Loan
Be ready to explain to your lender why you’re applying for a loan. Many won’t even ask how you’re going to spend the money, but it helps them recommend the best load products for your needs if they can understand why you’re putting in an application in the first place.
It’s best to keep your answer short and clear, and if the lender has any clarifications, try to remain open and honest. It enables you to make a good impression and communicates to your lender that you’ve prepared for this process.
Know What Your Estimated Budget Is for a Loan
When you go into the application process for a loan, it helps to know your estimated budget. Ultimately, your lender will decide how much they’re willing to loan you, but knowing your budget will help you set realistic expectations.
Setting your financial limit can also help you plan how much time you’ll need to pay off the loan. If you’re approved to borrow more than your budget, consider staying within the restrictions you’ve set for yourself, as it will help you stay on track of your payments.
Determine Your Credit Score
Having an idea about your credit score will help you figure out if there’s a possibility of being prequalified for a loan. Prequalification means the lender has decided that you could qualify for a loan based on a soft pull of your credit. A soft pull doesn’t impact your credit score as severely or as long as a hard pull.
When you know your credit score, it will help you be more prepared for the lender’s own decision. However, they could still do a hard pull on your credit score. If it doesn’t meet their requirements, they will inform you that you don’t qualify.
Prepare the Necessary Documents
In a personal loan application, you will, of course, need several documents. Each application differs depending on the lender. Traditional banks or credit unions could have their applications completed in person, but some will have theirs online. You’ll need to prepare documents proving your identity. These are:
- Certificate of citizenship
- State-issued ID
- Birth certificate
- Military ID
- Driver’s license
Lenders will also want to know that you have a steady source of income. If you’re traditionally employed, you can use the following documents as verification:
- Tax returns
- W-2s and 1099s
- Bank statements
- Employer’s contact information
If you’re self-employed, you can use the following documents:
- Income tax returns
- Bank statements
Lastly, you’ll need to verify your address with the following documents:
- Proof of insurance for your home, lease, rental, or vehicle
- Utility bill
- Lease or rental agreement
- Voter registration card
No matter your reasons for applying for a personal loan, it’s always best to be prepared. If you don’t get approved, you can always have the backup plans of getting a co-signer or applying for a secured personal loan. Having multiple backup plans can help you make the application process easier and less stressful in the long run.
Mid-Town Finance Company offers ,personal loans in Huntsville, Alabama. We keep our business straightforward, fair, and honest, so contact us now to help you get the best loan for your needs.